Hollywood studios grappling with when and where to release their movies on DVD, digital

For consumers already confused about when a movie goes on sale on DVD and Blu-ray versus its availability on video on demand, digital download, Netflix and Redbox rental and Netflix online streaming, life could get even more complicated.

On Tuesday at Blu-Con, a conference focused on the Blu-ray market, the presidents of home entertainment from five studios -- 20th Century Fox, Lionsgate, Sony Pictures, Universal Pictures and Warner Bros. -- gathered for a panel to discuss the state of their businesses.The Beverly Hills conference comes as studios are searching for new ways to boost revenue in the face of a slowly shrinking DVD market in which consumers are increasingly opting for inexpensive rentals instead of higher-priced purchases. Blu-ray sales and digital downloads are not growing enough to make up the difference.

The executives said the biggest issue they face is sorting through a proliferating array of distribution platforms and figuring out when and where to release their movies and at what price in order to maximize profits. Such staggered release strategies are known in Hollywood parlance as "windows."

"The most difficult conversations and the biggest meetings I have been involved in at the studio have been on this subject," said Universal's Craig Kornblau.

In a blunt assessment, Kornblau admitted that while consumers are eager to get their hands on movies through every platform as soon as possible, it's not always in the studios' interest. "We want to advantage methods that are more profitable," he told the audience of home entertainment industry professionals. "We don't have an obligation to give consumers what they want when they want it."

Most studios allow consumers to rent movies via the Internet or cable video-on-demand (VOD) the same day DVDs go on sale, though sometimes they push back that date for films they feel have particularly strong sales potential. Universal's animated box-office hit "Despicable Me," for instance, goes on sale Dec. 14, but won't be available on VOD until 23 days later, after Christmas shopping.

Universal is also one of three studios, along with Fox and Warner Bros., that has cut deals with Netflix and Redbox through which those two companies, the nation's biggest DVD renters, can't offer their films until 28 days after the DVD release. (Sony recently instituted a similar delay for some of its movies on Netflix.)

The effectiveness of those 28-day delays caused some disagreement on the panel. The Fox, Universal and Warner executives all said they have seen sales increases of 10% to 15% on their new releases compared with similar past titles. They attributed the better-than-expected performances to the fact that the movies weren't available to rent through Netflix and Redbox.

But Sony's David Bishop, whose studio signed a deal to offer DVDs the same day they go on sale through Redbox's $1 per night rental kiosks, has seen different results. "We have not seen any erosion on our sell-through performance," he claimed.

Warner Bros.' Ron Sanders said his studio's only problem with the 28-day window for Redbox and Netflix is that it's not long enough. "To be honest, I think it's a little short today versus what we probably need," he said. "That will get revisited as those deals expire."

Kornblau, meanwhile, said the studios are likely to play with the availability of movies through Netflix's Internet streaming service, which has grown rapidly in the last year and now accounts for more of the company's viewing hours than DVDs shipped through the mail. "While there are things in the Netflix system that are clearly cannibalistic [to sales], there are things we can change," he noted. "They can pay us more or we can reduce the quality of what we give them."

At the same time, the executives noted that the studios are expected to launch "premium VOD" for certain movies next year in which consumers can rent a movie within a month or two of its theatrical release and before the DVD goes on sale for as much as $20 or $30. That would create an entirely new window for the home entertainment business.

With all the talk of slicing windows in new ways in search of bigger profits, Fox's Mike Dunn admitted there's a potential downside: confusing or frutstrating customers. "If you slice the pie with too many slices, no one is satisfied," he said to laughs and nods from his fellow panelists.

-- Ben Fritz

Comments

[The Deuce]

All this does is make people download from P2P networks faster. No one under 25 worries about rental windows because they can just get it from the Internet. People like Craig Kormblau just don't get it and their arrogance just keeps biting them in the ass. Also, you idiots, stop reducing your theatrical windows. Two-and-a-half months for SCOTT PILGRIM? Really? Why would I bother seeing it in the theater if I know it's going to be out at the beginning of November?

[Katherine Warman Kern]

Kornblau: "We want to (take) advantage (of) methods that are more profitable," he told the audience of home entertainment industry professionals. "We don't have an obligation to give consumers what they want when they want it."

So why isn't giving consumers what they want when they want it more profitable?

Typically, most market growth case studies start with this premise.

Katherine Warman Kern
@comradity

[Nancy]

Way to think of your customers during a struggling economy, movie execs. Maybe if they all produced better movies in the first place, they wouldn't be struggling as much.

[kuruc]

last movie i saw at a theatre was appalooza, last dvd i bought was curb your enthusiasm, whatever the last one was. they ain't gonna get much money out of me.

[Sunlit Dreams]

Well... they've only lost revenue from us!

I'm crazy about Avatar. I went to see it in 3d at the movies, I rented it two times at Redbox, and looked for any previewed sales on it. I have been looking to rent it again and again, while I wait to buy the collector's copy. The same is true of 'The Chronicles Of Narnia - Prince Caspian' for my husband and I, and other movies we're eager to see! We would have rented them more, and bought the ones we like most.

So... there's approximately an EXTRA $20+ they missed out on getting a cut of, from our rentals at Redbox; which would have been in addition to our purchase of the DVD's as well. Since, few of the other movies interested me, I've been re-watching movies we own, and visiting Hulu online.

My husband and I currently can't afford to buy every movie we'd like to, but we're both very into movies. So, instead we rent as we can afford to (which adds up over time). Then we pick which movies we'd like to buy most.

We know we're not the only consumers who do this! Our family, friends and neighbors rent from Redbox because they we want to see the movies now, and can afford the price to rent. They also save up money to buy they movies they most want to own. If people love the movies, they'll buy them as soon as we can afford to!

Craig Kornblau said: "We don't have an obligation to give consumers what they want when they want it."

He's right, they don't. However, I've never heard of a business yet that got ahead by not caring about what it's customers want! That seems to me a statement that isn't based on a study of customers habits. From my angle, I only see more losses for companies practicing this way!

How much of these decisions are based on a study of consumer habits, and how much is based on statistics of sales? Perhaps the Presidents of each company should try living like their average consumers, to get a different angle of perspective?